Q1 2021 Controladora Vuela Compania de Aviacion SAB de CV Earnings Call
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Good morning, everyone. Thank you for standing by welcome to <unk> first quarter two towers on 'twenty you wanted a financial results conference call.
Lines are in a listen only mode.
So let me the company's prepared commentary, we will open the call for your questions on answers instructions on how to ask a question will be provided at that time.
Please note that this event is being recorded.
At this point I would like to turn the call over to MS. Maria Elena Rodriguez for a scrubber finance and Investor Relations director.
Please go ahead, Mr for you guys.
Good morning, everyone and thank you for joining the call, but after a day, it's a president and CEO and we get a got it on.
Our line execute a vice president Hooker block in spine, and our Chief Financial Officer, Hi missiles, Jim will be discussing the company's from first quarter 2021, Russell Afterwards, we will move on to your question.
Please note that this call is for investors and analysts only.
Questions from the media will be taken on a new G visual basis.
Before we begin please let me remind everyone that this call may include forward looking statements within the meaning of applicable securities laws.
Forward looking statements are subject to a journal factors that could cause a company's actual results to differ materially from expectations for reasons described in the company's filings with the U S Securities and Exchange Commission and income showing fashion I think got out.
Furthermore, flowers undertakes no obligation to publicly update or revise any forward looking statements.
It's now my pleasure to turn the call over to a largest president and CEO Mr. Andrey good on tonnage.
Thank you very much money you Linda and thank you very much everybody for joining us today.
There are five key messages I would like to emphasize decent book.
The first one.
In the first quarter of 2021, well that has demonstrated its ability to adjust capacity.
To match demand with a focus on rebuilding a total revenue per day level seat mile.
There's a second wave of the seven day.
So one of the first quarter.
As demonstrated strength.
The adjusted capacity.
Space, I'll say, a volatile demand environment.
We finished the work.
88 per cent of the ASM capacity flow in the first quarter 2020.
Exceeding the guidance of 80 percentage wise as well.
Cash flow and far better than any probably a couple of radio and also a marriage.
For the month of January capacity measured by available seat miles 97 per cent of the same period a 2020.
Adjusted the Christmas holiday season, specifically in mid January we observed an increase in COVID-19 cases, both in Mexico on in the United States, which negatively affected the demand for air travel.
You've been a muscle when stay at home you orders on travel restrictions were enacted.
Soon after the restrictions were implemented during February.
Because you can reduce total capacity to 75% a figure seven versus the previous year.
Moreover, we shifted 35%.
National's capacity.
Back to the Mexican domestic market, which proved to be the right personal touch.
As a real surge.
In the mountains.
Stated capacity for a March operating total capacity 93 per cent of Hsn's versus the same period of last year.
These capacity increase was mainly driven by domestic markets, where we operate at 105% of the assets.
Our active capacity management allowed us to dramatically improve fares and provides the opportunity to stimulate on CDN revenues.
The first signs of recovery in March.
<unk> allows us to capture a rebound in demand through higher capacity healthier load factor was a strong unit revenue per passenger.
Sure.
To put on where flex seeking capacity management.
Fixed.
<unk> increased over 70%, 70% from early February two loans.
March.
I'm proud that as a team in a corner there.
So not a challenging we were one of a very few earnings in the words that deliver a 93 per cent of capacity versus the first quarter of 2020, we don't see a single digit of total revenue per available seat mile contraction year over year bearing in mind.
On damage start duty, Mexico already in the second half of March doing training.
My second message.
Just a Polaris continues to take strict measures to prevent the dosing the first Florida with four of them on that $23 million seat cash on cash.
Yeah.
For the first quarter, we delivered a daily cash burn index is 23% lower than our or reaching a guidance, which time it will detail.
It is worth highlighting the strong cash you can read a generation provided by our successful 15th anniversary anniversary promotion, which surpassed last year's sales. Despite the price gave me.
Okay.
In the face of the price reduction in February we spent a week went one step further in our cash preservation strategy.
In the first quarter, we targeted on that eastern on working capital relief on over $100 million.
I want to thank you our suppliers for their continuing support.
All in all this month of the crisis.
My third a message.
We remain focused on maintaining a lean cost structure with one of the lowest unit cost seem to Nevada on any industry.
Despite the capacity adjustments through the first quarter, we get costs under control the company achieved the cost per available seat mile ex fuel a 478 U S. Dollar for the first one on 2021, which is probably one of the lowest in the world.
Talking about cost.
Focusing on the environmental perspective in the first quarter, we incorporate an additional 83 to a new aircraft where fleet closed in the word with fuel efficient new aircraft, representing 36% of our total fleet.
The fourth message is that a recovery is gaining momentum and in the first quarter, we focused on strengthening the foundation of our long term growth.
Vaccine rollout in the U S. On in Mexico has gained momentum in growth markets and confidence in the air travel is returning finally to our system.
So long as recovery is unique in the world.
Our competitor a scaled down to an aggregate reduction of 30 plus percent of the Mexican fleet.
For years, we're nice has been a bearing itself to have the lowest unit cost on a.
A strong balance sheet in order to see such an opportunity.
As a result.
Looking at the medical meeting back we executed agreements to incorporate eight additionally to a new aircraft to our fleet in 2021.
This additional capacity will be deployed primarily to strengthening our leading position in the Mexican domestic market.
My first message.
Is that a work flow you've already before the second line third quarters is to accelerate while ours is a recovery with profitability on a solid infrastructure to support this growth.
It's a first quarter.
MS work strategy was focused on defending profitability on preserving liquidity.
Our March 2021 figures on our capacity management definitely.
Yes.
Provided to the network, where it's a testament to the Mexican domestic market opportunity and to go on an artist has potential to expand its international network ask the United States on the Central American markets recover.
Okay.
Furthermore, our priorities for the remainder of a year.
First generate a consistent growth for our investors with a actions in line with our sustainability program.
Grow and consolidate our leadership in core markets, while increasing presence at Mexico City Airport accelerated return on expanding our operations in Central America ensure a solid corporate infrastructure with a highest industry strength standouts on training and safety as a boiler technological.
To foster our commercial and Easter needs for a sustainable growth.
One day, a peaceful labor environment with product people on flexible terms and conditions on finally preserved our solid capital structure balance even short term liquidity with a right long term funding to support our growth.
Having said this let.
Let me pass it over a two hour airline executive vice preceding quarter line can start.
To comment on revenues on the commercial strategy and to provide you guys a guidance on capacity for the following months Holger. Please thank.
Thank you Enrique.
The first quarter had two distinct periods with a first half being very challenging in terms of demand, but the second half had a meaningful pick up ex COVID-19 case, count declined and vaccination rates in the U S accelerated.
We reacted fast to the second wave by reducing capacity at the end of January and into February.
And reinstate a capacity during March and April to take advantage of the improvement in customer confidence driving day Mac.
Proportionately, we reduced more capacity in the U S market in January and February the Mexican domestic market demand.
A much better.
The capacity and load factors represent one of the fastest recovery.
Any airline worldwide, while at the same time improving traveling.
Total ancillary revenue per passenger reached a new record high of almost 768 vessels for the quarter, an increase of 36% year over year non.
Non ticket revenue accounted for 49% of total operating revenues driven by the resilience of our ancillary and other initiatives.
In this quarter, our ancillary matured well, especially those products, we launched last year at the height of the pandemic.
Ex flexibility options we.
We're also seeing the payoff on your website, which makes it easier to purchase a anti leased for our customers.
Finally, the artificial intelligence based ancillary revenue management tool has performed well and allows us to maximize revenues through price and demand optimizations.
Our operational performance remains strong in terms of operational reliability on time performance was 91% for the quarter.
You're a completion was 93% for the same period.
Since the low point in February we have seen a strong market recovery with strong last minute demand across the board.
Booking curve for the second quarter are solid.
Despite significant additional capacity, we added to our network.
Although a booking windows remains shortened relative to those pre COVID-19.
We are seeing a slow.
A return to normal booking behavior as customers make plans for spring and summer travel, especially in a core VFR and leisure segments.
Pent up demand as evident with domestic leisure bookings recovering above 2019 levels.
Beyond our own bookings, we are seeing encouraging data points in the broader economy in Mexico and a U S.
A testament to positive demand momentum was our <unk> anniversary promotion.
During the first half of March we held well, obviously, a annual anniversary sales promotion typically the biggest promotional per year.
This year the.
Most of the surpassed both last year and 2019 record sales favoring the companys liquidity position.
Once the case count has.
Have a declined dramatically in both the U S and Mexico over the last two months, we are vigilant in monitoring any potential rebound in cases.
<unk> has already demonstrated its ability to react fast to match capacity with fluctuating demand and in a third way scenario with a game deploy a flexible approach to capacity as we did in the first quarter of this year include.
Including redeployment from affected markets into those which are more resilient.
No.
Moving to a avenues for growth.
The majority of our growth for the remainder of the year will be focused on the domestic and U S markets, where we are seeing strong demand recovery.
In the domestic market, we recently opened for sales to new previously Unserved routes.
Mexicali and Morelia to Cancun.
Well, a hartsville continue to monitor the markets and take appropriate action to deploy capacity, where we see demand.
We have seen a recovery in the U S market, particularly in three segments northbound leisure.
Mainly to takes us a nevada.
South bound leisure mainly through the Mexican beach destinations.
And VFR demand across the board.
With the last two segments, gaining momentum along with the vaccine rollout.
In Central America, we see market opportunities arising from the capacity reductions of reached a key players and also an increase in the customers' confidence to travel to the U S.
However, due to a different entry requirements into central American countries demand is still subdued.
We expect a pick up shortly as countries streamline and ease entry requirement for travelers.
Also remember that Costa Rica.
<unk> Costa Rica is based.
Again, it's a a category one.
Status, which gives us the opportunity to restart growth in Central America.
Okay.
Oh, one other avenue of growth for this year is the opening of new markets for a large such as the recent request to upgrade Colombian routes.
To round off the 18 to raise that we can offer from Central America, we are adding boulerice El Salvador to our portfolio a air operator certificates.
We plan to launch a large el Salvador by the second half of the year and expand operations to the U S.
We continue to build a demand from bus switchers and this quarter, we have launched a in depth market research study to better understand the bus customers.
No sales on Golar slides have returned to normal pre COVID-19 levels.
Flight cancellations due to economic changes are also reducing.
The outstanding balance a voucher has diminished rapidly by the end of the quarter.
A proficiency in managing this recovery is a reflection of the ability to transform ourselves.
There is no place where the transformation is clearer than in the digital side of the business.
I talked about a record setting anniversary promotion.
A big part of this success is intertwined with one of our oldest decisions during the pandemic to completely renew our most important storefront on our website <unk> dot com.
After total even nearing the website, we're doing the same with the Polaris App.
During the COVID-19 pandemic, the traffic shift to mobile devices and the E Commerce adoption was accelerated.
This is great news to enable us to reach out to the emerging middle class and two bus switchers.
Smartphones are the most popular device used to connect to the Internet and Mexico, 92% of the Mexican Internet users connect regularly through smartphones.
We will continue our app refresh before the summer period.
It will include personalization user experience enhancements.
More upsell capabilities and other state of the art features in.
In a project that is being implemented with Google consultancy.
We have a continuous digital deployment methodology with an aggressive pipeline of development, which includes for the second quarter, New re class families to boost ancillary revenue a.
The launch of Whatsapp notifications to communicate changes and disruptions to customers in real time.
And self bag drop.
Yields for airports.
The integrated chatbot for digital customers.
Continue to enhance customer experience as well as promote cost reductions as over 78% of our digital interactions are now handled by our chatbot without human intervention.
I'm happy to announce a call center zero, a project, which we plan to become the first airline.
Without a traditional call center and move all customer service to more efficient digital messaging channel and social media.
This will facilitate both cost reduction for the company and better service for customers.
This month the boiler.
Trademark received the famous trademark.
Ryan Rackley recognition, which sums to the achievements made during our first 15 years of operations.
This is a endorsement of the company's commitment to strengthening its brand in the market and creating a valuable asset for our shareholders.
To celebrate with our passengers the 15 years of building one of the most valuable brand in Mexico and to celebrate the rebound of tourism in Mexico, we are launching a big <unk> promotion to thank all our customers for this recognition.
Day.
Okay.
As Enrique mentioned on.
Our strategy has returned to claim opex.
For the second quarter, we will continue to adapt with the demand environment.
We intend to operate approximately a 110% of capacity as measured by a sense versus the same period of 2019.
This puts us back to the full potential a fleet productivity in terms of <unk> per aircraft per day.
And one of the highest productivity a similar stage length carriers in the world.
Well ours is now well positioned to take off and look for long term growth opportunity.
Now I would like to turn over the call to our Chief Financial Officer have a pulse to discuss the financial performance for the quarter.
Harder now I will continue the discussion on her will result in a corner from the figures filed with the Securities and Exchange Commission and comes from notional amount of on cash on noise.
I am excited that's how a recovery continues on.
Our focus is now shifting from Mr. Highlighting the company's financial still creating value.
Returning to profitability generating cash and you're starting to grow again.
From a seasonal standpoint.
First quarter was a year could you just correctly with largest most challenging in terms of profitability.
And this year it was heavily weighted by the pandemic impact on demand, especially during February.
Total operating revenues for the first quarter were $6 4 million versus <unk>.
Representing 89% on 82% of <unk>.
19 on 2020 total revenues reported in each period, respectively.
So ex fuel for the first quarter increased by 15, 7% versus the same period a previous theory flow.
And at 478 U S dollar assets.
This increase is explained by the capacity reductions implemented during the quarter.
All other controllable cost items are in line.
Total on towards gasoline for the quarter went up five 6% versus the first quarter of 2020 closing at 660 U S. Dollar sense also a stockpile sequential for the crushing capacity.
Please note that the increase versus the fourth quarter of 2020 is driven by higher if you had a few prices lowered capacity.
Your line is still one of the lowest unit cost operates in a world. This lowest cost a stricter is the backbone of our solid business model.
Moving on to profitability numbers EBITDA in the first quarter was $1 3 million pets.
Saucony on you talked a margin of 20%, which compares with 27% in the same period of 2020.
It is important to note that the 2020 quarter was not significantly impacted by the pandemic EBIT in the first quarter was a loss of 779 million vessels, representing a negative EBIT margin of 11, 5%.
Net loss for the first quarter was 733 million on vessels with a negative net margin of 11, 4%.
Well, ladies has got a strong against a balance sheet profile among Mexican carriers.
At the end of the first quarter on the company registered a negative net debt of $3 2 million vessels, excluding lease liabilities recognized on Thursday, I operate 16 adoption and total liquidity of $1 2 billion.
As of March 31st 2021 cash on cash equivalents were 400 on $23 million, representing 42% over the last 12 months operating revenues.
Our last calls a week.
For an average daily cash burn a $1.2 million during the quarter.
We over deliver keeping that fee to approximately $900000 per day, a result of a strong sales during March in this quarter was August repaid approximately $142 million from working capital relief receive on coach on services provided during 2020.
Also during this quarter $100 million a finish up on working capital release was achieved through a agreements on new payment profile with our lessors.
Line with our liquidity preservation on program.
Contrary to other Mexican carriers.
End of the first quarter, our suppliers liabilities were equivalent to a 22 days of Opex and on a path to pre pandemic levels.
That's a guy that's where a budgeting after one Congress total aircraft by year end.
EBITDA margin for the second quarter in the high Twenty's.
And average daily cash burn for the second quarter of approximately 600000 dollar strength and.
And reaching cash flow breakeven or even positive in the fourth quarter of 2021. Finally, Catherine makes you a level similar to 2019 by at the end of this year.
Our focus today continues to be cash preservation, a return to profit.
During the first quarter income.
Company incorporated a one <unk> hundred 20, Neil ending the quarter with a fleet of 87 aircrafts with an average age a five five years.
For the remainder of a year, we expect to receive three new aircraft from a repurchase firm with Airbus in a.
Addition assembly convention, we plan to incorporate a TV one is on a 320 Neo store fleet in 2021 through a straight operating leases. Additionally, we have standard for 12 months day leases of 2019 fields, which are currently country. A is it to field a bonding to mark the company's currently enrolled.
It even farther market opportunities and incorporates additional healthy capacity.
You know a guy less de ATR aircrafts are budgeted to be neutral in the classroom and comes from levels. The plant with its first job is to reinforce a core market. So as a result, 80% of its utilization will it be a recurring core network, especially on the reversing capacity in Mexico City.
Note that the labor as measured by adjusted net debt to EBITDA will have a temporary impact of around one ex gradually returning to near for levels over a 12 month period.
Our neo aircraft transition plans continue on driving fuel efficiency towards a lower cost them a support our environmental could be net GMP certified post on average combined fill efficiency of 20 per cent per seat a nearly 50% reduction 19 noise, a nitrogen emissions, which are 50% below the current.
The industry standard.
We expect approximately 42% of our fleet to be fuel efficient a 220, new family by December 2021.
The company is committed not only to deliver growth in the next years, but also to reduce our carbon footprint and to continue driving our business without a lock on for me.
To better convey our ESG commitment we will release, an integrated annual report along with our 'twenty 'twenty on Marine Park now I will pass it back to Enrique for closing remarks.
Thank you very much.
Moving to lead March wasn't a inflection point.
In terms of passenger demand from key RASM limits.
<unk> had a assuming that's a passenger demand recovery.
We see a path to returning to operating profit.
Important to recall that.
Where it makes it kind of went bankrupt in 2010 the market with D. A.
Sure the capacity void in a live.
On a year the passenger levels have bounced back.
Back then.
Took faster nutrition advantage from that market opportunity.
Yeah, we are once again.
We believe recovering our capacity carefully managing the ramp up costs as a team we are obsessed to finding ways to increase efficiencies drive growth DVD, but our important target of growing the company is here today, and we will take advantage of it.
On to express my sincere gratitude to our familiar from ambassadors.
Board of directors investors, our bankers they source from suppliers for their commitment and support a cost cutting off this exciting position with such a unique opportunity in our markets. We are at the beginning of the runway and we will start growing back again operator. Please open the line for <unk>.
Yes.
I mean, if you're with lighthouse great question, Please birthday Star and one on your Touchtone phone you're on.
We draw your question at any time by price and a pound key.
Once again to ask a question. Please press the star and one on your Touchtone phone.
Thank you.
Okay.
And we'll take our first a question from Helane Becker with Cowen. Please go ahead. Your line is open.
Thank you very much.
Can you hear me, yes, yes, good good.
Good morning.
Good morning, and thanks very much for your time Hum.
On kind of still wondering how much ticket pricing pressure there is in the market and how you're thinking about.
Getting yields back to 2019 levels or I don't know if demand is really a strong are you thinking about it.
Hum.
From a you know just raising ticket prices.
Yeah.
Yes.
Helane.
There's a couple of things happening with ticket price in the first quarter clearly a demand was relatively low.
No and to stimulate the remainder of demand, we reduced yields and ticket prices.
We did make up some of that loss with ancillary revenues as you see our absolute revenue percentage is now a close to 50%.
As we move into the second quarter, and we see strong last minute demand.
We are able to.
Improve the pricing environment for a ticket.
We are seeing.
Higher ticket prices on that last minute demand.
And into the summer we're seeing.
That's a relatively optimistically into the summer with strong bookings growth and we believe that's a we would be able to.
Recover some of the pricing environment in the market.
For travel in the second quarter, what we're now looking at is a returning close to 2019 levels for the second quarter, which is earlier than we had expected.
Okay.
That's on.
That's very helpful. Thank you very much and.
Yeah.
Thanks for that with my.
Those two are kind of my question. So I appreciate the time.
On the stemmed a hole to be in shock delayed, but we are targeting to either a second.
A second quarter.
I don't think a stock I think its exhaustion.
Hi, Thank I appreciate your help [laughter] talk to you later.
Yes.
We'll take our next question from Duane <unk> with Evercore ISI. Please go ahead.
Hi, Thanks, I appreciate the time.
The line was a little bit difficult to hear for a for a period of time it might have just been mined.
So I apologize if I ask you something that you've already communicated but.
It looks like you know two Q3 Q schedules are showing about a 10% in capacity year over two can you just.
Sort of update us on your latest thinking on capacity the next couple of quarters.
Yes.
So for the second quarter, we are currently seeing.
110% of 2019 capacity.
And.
This will put us back to the full potential of our fleet in terms of ASM per aircraft per day with it's a respective a impact on on CASM.
And this is one of the highest productivity for any stage links a similar stages on carrier in the world.
For the third quarter and weekend and Jaime mentioned that we are adding eight additional aircrafts. So.
So we should see higher growth for the second half of a year.
Gotcha and then.
Just competitively we watch.
Our our web tracker data pretty closely in and.
Now for a couple of months now Mexico has been up.
Relative to <unk> 19 on the on that web tracker, and it's really the only region.
That we see that level consistently you and your peers and so I guess the question is what are you seeing competitively in terms of discounting further out on on the booking curve maybe.
Operating for cash generation as opposed to a.
Sort of a RASM maximization and then you you touched on it in in Hawaii <unk> question, It sounds like close and Youre able to sort of yield up but you know if you could just comment on Q2 and to the extent that there are forward yields that are kind of below what you think they might need to be thank you.
So.
On the on the market capacity side a duane.
As a reminder, the market is I still have a gap of around a 54 large equivalent a day 20 in order to backfill the capacity that was left by weaker competitors.
That's on the capacity side. So yes, we are recovering fast all the other competitors are also recovering.
Sorry, just a Joseph a.
Isn't a capacity comment it was actually Oh, a web tracker activity comment right. So activity, which we think is a pretty good proxy for bookings.
As a point year over to non.
Not a capacity sorry about that.
And on on the on the demand side at the current rate a recovery. We are optimistic that demand will completely recover this year, especially in the domestic market and with a gap quickly and clothing as well in the U S Mexican market.
Seeing some points of strength, which are the leisure destinations in Mexico.
Both in the domestic market as Mexicans go to the beach destinations, but also a south bound.
By U S carriers into the leisure destination.
And then we've also seen quite a strong recovery of north bound traffic both on the BFR side and the leisure destinations and it takes us a Nevada and California.
So even on the on the international side in a core markets. We are seeing a relatively strong recovery.
Sorry.
Just to put a bow on that.
Go ahead sorry.
Duane I don't know if you heard me, but yes, I mean, the shift in terms of T. Rising from February from the beginning from February through the end of March was 70%.
And that's precisely a testament to that last minute demand that we're seeing.
A as you mentioned a further out bookings are still somewhat soft.
Our improving as a travel a confidence returns, but are still softer than what we saw on 2019.
That is being compensated by relative very strong last night, a demand, which enables us to a two yield up and that's what I was mentioning to a lane, we're seeing Chad and recovery through 2019 levels with that from last night Tonight.
Okay I appreciate the thoughts thank you.
Thank you Duane thanks for your questions.
Yeah.
Our next question from Josh Milberg weighted Morgan Stanley. Please go ahead.
Oh, Hey, everyone. Thank you for the call and congratulations on a.
<unk> phenomenal results.
Just on this and I'm sorry to insist on this but just on the on this trials on performance and that was a pretty remarkable kind a turnaround from early February to March but I was just wondering a if you could talk a little bit about how your performance varied between domestic and cross border U S. On on the yields on a unit revenue.
And then and then also maybe a little bit of a comment on just how how the Easter high season.
Played into that but the question a rebound that's my first question.
So on the domestic international split.
On the international was definitely weaker in the first quarter with some rebound.
In the late quarter in the late weeks of the quarter.
We are now rebounding into April and end of March.
On may eight.
Maybe seen the schedules we've added approximately a 30% more than 2019 into the U S market.
And we've seen a strong rebound of international more on the second quarter than in the first quarter.
Mystic.
Has held up better than the first quarter and it continues to be relatively strong in the second quarter with that very strong last minute demand that there was a already mentioning in previous questions. The Easter high season saw the same profile with very very late bookings.
I would say in the second half of March a.
Materializing into the Easter season, which was the last week of March in the first week of April this year.
Okay.
Okay. That's great appreciate that a detailed response and then the second thing I wanted to raise with you guys is just on on the Big addition, you know obviously that that's that's a major sign of confidence I imagine that it may also be driven by you know that.
The interest of getting a head of some of your competitors and I just wanted to one ask you if you could.
You did mentioned in the release that the impetus for that move where with a favorable leasing market conditions that I was hoping you could just you know.
Give some some detail there and then if you could also just talk about what you're seeing from your competitors on the fleet side and I think that there was even a a recent report suggesting that inter jab is looking at restarting its operation I don't know if you can comment on that development, but maybe if nothing else you could.
Give a little bit of a.
Comment on on what you're seeing from competitors in general on the fleet side.
So.
Yes.
As we have explained I mean the process sales.
Disappearing from the markets and a Mexico a restructuring.
We've seen more than 33, 34% of the tea leaves the market okay.
We.
Went out initially what we have looked at Wassa.
The ability of doing a.
Power by the hour.
Tradition, a CEO Eric <unk> aircrafts.
As things start to evolve the company was able to get very good rates on a <unk> meals and those circles here to stay fluid and extend growth years.
We decided to take advantage of that day.
The idea of how we powered by the hours at the beginning was good because we didn't know collected market was going to be on the recovery of the market, but with brokers as a oxy beach in a new everything we see the market recorded a faster now.
And as a result of that we decided to go ahead and.
Higher those eight aircraft on a burden on these basis rent them on a permanent basis straight leases and as I said.
Very good.
Sales of these rates are.
Speaking on our competitors.
I would say a roommate equals remains on its on its plan.
Shrinking down to somewhere around maybe doing a three shelves by the end of the year.
We have seen we know Claire.
Devote a loose east.
On.
Some day.
Good day.
A total of 13 80 21 from January to December 21.
And.
At West compared with 16 aircraft from a large.
We have heard rumors that there is a process of trying to bring five new shelves by the end of a year.
That's still not contractual.
The rest of the market a remark.
On a continuous being.
A very constrained.
Yeah.
We.
Basically no news from Dar, but we know that financially there a stroke.
Yeah.
Yeah.
Very good thank you for that Enrique.
Yes.
A question from Stephen Trent with Citi. Please go ahead.
Hi, good morning, everybody and thanks, so much for taking my questions.
Two quick ones for you guys if I may.
The first is could you remind me.
You know what percentage of your tickets pre pandemic, where a refundable.
And whether or not that might change going forward.
Yes.
And that'd be my first one if I may.
Sure Steve.
When we started as a Sunday may give you a lot quicker than ever before.
March March which were around 3 million vessels in vouchers.
Remember that we provided a customer they option to get the cash refund and to get a voucher plus 25% or can change a ticket without any charge a from.
From those 3 billion peso that we issue that they're selling a remaining two economy on 72 million vessels that they haven't been a thing.
Yeah.
Okay, that's super very helpful.
And just a second thing real quickly you know certainly given a very good very good competitive positioning.
How are you thinking about.
Acquisitions longer term I mean, I don't really mean other airlines, but.
You talked about the chatbot and boosting your App you know do you see anything acquisition wise on the electronics side or you know a carbon capture type programs or something like that longer term, we just would love your thoughts on that.
Look Steve where we're at.
Focused on our own business on developing our own business on growing a room business pushing it off to 100 total aircraft by year end.
Brewing on where every day, our margins with a second quarter in the high Twenty's.
On.
Protecting our daily cash burn for the second quarter with a high focus on that.
<unk>.
Hi made us a bromine is off to a great.
Yeah.
A achievement, if we get back to our cash levels.
2019, and just a quick word I would like.
Entire team to be absolutely be focused in these four priorities.
Okay. That's super very helpful. Enrique let let me leave it there and thanks, Thanks again guys.
Thank you Steven.
Yeah.
Well take our next question from Mike Lindenberg with Deutsche Bank. Please go ahead.
Oh, Yeah, Hey, good morning, everyone.
Connie I wanted to go back to a comment that you made about you know EBITDAR in a high Twenty's was that June quarter or is that.
All year on that.
Got you a second factor of Michael did you on quarter, Yes Uh-huh.
Okay. That's helpful and then.
That was a seizure or.
You know.
I know you said that you're budgeting for 100 aircrafts Enrique I heard you say 100 or maybe even more.
We now know that you have 90, a based on the press release from two days ago, but that press release also.
Indicated that you were evaluating further market opportunities to add additional aircrafts. So I guess it looks like that maybe you're looking for another two or maybe you are looking for more so.
One can you give us a sense of.
How many more airplanes and then maybe it's only two but then what are the additional opportunities. It looks like these eight or make the Mexican market are these additional for Central America International.
Or or U S. A.
So Michael.
Good day.
We will work. This is we went through a process of evaluating market opportunities one by one.
Once we had a total asn's.
[noise] drove back to the number of aircrafts that we need.
Okay. That's currently we are right.
In terms of certainty.
<unk>.
Okay.
We've seen more opportunities that we want to be cautious.
And a cautious in the way, we see the demand recover and cautious.
In terms reflects a third wave could be okay.
As a result of that.
We are playing safe with these eight aircrafts we are so far.
We are convinced that it's noteworthy that puts a market needs.
But that doesn't mean that day.
Moving.
The process of ramping up the demand.
The next three months.
We'll probably come back until you guys that we are doing something else.
Okay, absolutely absolute focus is heightened share is going to be to put those shelves backed into the Mexican market, but we see additional opportunities.
Those into the U S and de centered on American markets.
And.
I think we want to keep ourselves the flexibility based on demand.
And remind you guys that the capacity GAAP useful from a 50 shelves a.
Or.
Yeah.
<unk> included a lease.
Lease to backfill a big box.
What's left quite a bit weaker competitors.
And then okay.
Important statement that I made a band.
In 2010, when Mexicana left the market two class he took the market by about a year to fulfill the buckets that Mexicana left.
Yes.
We've been very well by 2010, and we want to do it very well again this year.
Okay.
Very good.
I assume this is back to Hany I.
I have a question about.
The.
Yeah.
You're a monetary liability position.
Last quarter.
We saw the peso so the December quarter, I should say, we saw the peak so actually appreciate.
Nicely versus the dollar and you took a a sizeable gain.
We then saw a reversal.
And the currency and yet you still took a gain it was a much smaller gain and so I just.
Historically I thought that you had a sizable dollar asset.
More than offset your dollar liability a what was this has there been a change or.
He always change Michael.
There's no change there.
And it's just the way, it's balanced out and the movement of the currency or cash.
Okay.
On the balance was in the first part much heavier than the cyclical part okay, but in reality, there's no changes there.
Uh huh.
I see sort of a company in terms of dollar on.
On the balance sheet remains pretty much disappear.
Fair enough.
Okay that makes sense, there's a lot of moving pieces and it just has a math worked okay that makes sense then alright. Thanks.
Thank you very much.
Thank you Michael Michael Thanks for your questions.
Oh of course Enrique Jaime.
Okay.
We will take our next question from from Danielle <unk> with UBS. Please go ahead.
Yeah, Hi, guys. Congratulations on these various from a results a have a couple one is.
Can you talk a little bit about the main drivers for ancillary revenue less Florida or you had mentioned a sum of.
Some new service operations to consumers like a chevron's flexibility fair combos COVID-19 testing. So is it is it the same.
That are driving ancillary revenue up and then your view on the sustainability of this level of a slurry revenue going forward on.
For us to have a better view when the market normalizes. If we're gonna have you had improving but at a same time ancillary revenue a decrease in.
Or if a first somehow you can sustain higher ancillary revenues after market normalization. That's a the first one thank you.
So on the ancillary question.
Yes.
We are seeing.
A lot of uptake on the product that we launched during the pandemic, a mostly around flexibility and some of the insurance combos are absolutely on where we're seeing the full run rate of those products. This year with the uptick in the revenues.
Our intermediate target is to get to around them.
$40 per Pax mine now at $37.
As we grow the international schedules, where where there's typically more purchase a ancillary products.
That should be achievable that's in our pipeline.
Now, having said that as the base fare increases.
Into the high season of the summer and a recovers a for the remainder of the year the percentage of ancillary revenues as a percentage of total operating revenue.
<unk> go down somewhat we're targeting right now too.
To remain above 40%, probably around a 40% to 44% for the remainder of the year, but that's mostly attributable to the rise in base fare.
And we also continue to develop a dynamic pricing scheme for ancillary which has been a tremendously successful with some.
Artificial intelligence tools to predict a <unk>.
<unk> power of certain absolutely products for a certain customer segments.
And we're also working very hard on personalizing ancillary offers for certain customer segments.
Okay pretty pretty clear. Thank you. So much on my second question is on them is locks from ethers, yet in the major airports in Mexico, mostly Mexico city or a day available already two other players so.
When you say you are taking advantage of him to add this capacity you are already taking those there's lots is that.
Fair view on on that matter.
Basically the lots are owned by their part they are not on assets from any other airlines, obviously, you get the right of use.
So far on whatever we have requested and for the summer season has been granted to a Larry.
This is a.
Space a comparison with operations on we're taking place during 2019.
Usually it takes a source like like like like the Easter holiday.
Got it almost on a level.
On sulfide and they run a large scale on on a seasonal basis and we have what everyone has requested.
There is an extension of the Juicy solutions those are on that yet the rules on China, and maybe it's going to expire in a sometimes et cetera on west at Boston on for that.
For the COVID-19 situation.
Our dog in order to waive on together you also need to make comment on any delta.
We therefore, so we really need a.
There's a still some based on continued rolling on a slots.
Okay and that but every time, you'll get those as lots. It's a if you continue flying them. It's it's a guaranteed that theyre going to a.
I remain with those is that correct.
It's not guaranteed.
Moving to a use them on operating on time, and if you don't comply with it when they use on the time.
You will lose them.
Okay, Great and one last thing if I may on on the lease on the cost a believes this.
So almost 10% of your fleet is gonna be under these new contracts by year end should we expect a reduction in day average cost of a lease for aircrafts.
And those two aircrafts.
The aircraft, yes, there is a reduction from you remember its sale of almost a 98.
Yeah.
Well, we're a real economic at a really good economic terms on those eight aircrafts.
Yeah.
Okay perfect solutions again, thanks, very much have a great one.
Thank you Rodrigo.
Once again, it is a star and one.
Telephone and we will move next with Bob from on CBS with Barclays. Please go ahead.
Hi, guys. Good morning, Thanks for taking my question I'll hop to a quick a.
Questions. The first one is a.
It looks to me that you have a.
Hmm.
More on.
Congrats on a approach in terms of a the expansion in Mexico City.
One types of routes are you looking forward to two corporate loans are you looking for more than five lease sure to a strengthened.
Mexico, Cancun or a muscocho as once a games line for Europe, especially in Mexico City that would be my first one.
On my second one is a beat on them on your plans to expand a in.
In Colombia is a little north.
Where should we.
Okay.
What should we expect from from those non team the nice a couple of quarters.
Thank you.
So on your Mexico City question, we're currently at a 27% domestic.
Seat share in Mexico City is 22% a.
Total seat share if you're a at the international market.
Which is still a relatively small compared to our overall market position in the country.
We have been growing a in Mexico with additional capacity and they are just important to note that we are not changing.
Our network, we're not changing our business model, we are focusing on a core market, which is the price sensitive leisure.
Customer, so, we're adding capacity to cancun, Los Cabos, Puerto by Yahoo.
And the VFR market, so you'll see a tijuana additions.
Additions to some of the secondary cities in the center of Mexico.
On top of that we also back filling capacity that was a leftover in the international market.
You might have seen significant additions to takes us both to Houston, San Antonio and Dallas.
As we look at a back filling capacity that was left over by a weaker competitors.
So that's a on Mexico cities, we do see a continued opportunity to grow our business in Mexico City, and a position in Mexico City.
Colombia, we have a full authorization tool.
Start operations to Colombia on for this year, we were granted authorization last week and we're now looking to start initiate operations.
Yeah, probably.
Two a very small extent.
We've been granted authorization for both of a large Costa Rica and Polaris Mexico.
So you might see some additions.
<unk> seen a very.
From a from Mexico and from San Jose Costa Rica.
Okay.
Typically we start operations on a very very small basis, and then and then start growing as we stimulate demand.
So from your basically testing they might get to be more specific in Colombia are you I mean.
But what a.
Or more like a niche or market share or many of you on what's what's your strategy for this first phase.
So today, we do get the per day.
Well for the general operation, we will be defining the seat at variance on announcing the city pairs. When we have the link on a pool was a specific approvals.
Okay perfect.
Thank you very much.
Thanks to you.
Okay.
No further questions over the phone at this time I would like to turn the call back to Mr. Enrique bolt on I know for any closing remarks.
So I went to experience really my sincere gratitude to all of our investors. During these very difficult times that we went from.
Im real excited us a a recovery continues and our focus now shifting from stabilizing the company's financial to creating value by returning to profitability generating cash and starting to grow again. Thank you very much for everything you do for us in dispute with a tremendous support especially.
You can get a capitalization periods and thank you very much for sticking to us and we welcome any other potential investor from now.
Yeah.
Okay.
I will conclude today's conference. Thank you for your participation and you may disconnect at any time.
Yeah.
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